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AFC Uzbekistan Fund January 2023 Update


Dear Investors and Friends,

The AFC Uzbekistan Fund began 2023 in positive territory even though the economy suffered a setback due to a “once-in-a-generation” cold snap which spiralled into a domestic energy crisis. Aside from the cold, during the month, Clearstream paid a visit to Uzbekistan to advance discussions on establishing a custody link for foreign investors, and the over-the-counter stock exchange “Elsis-Savdo” was brought under the management of the Tashkent Stock Exchange. Relative to the past twelve months, with a lack of news flow, January was a busy and positive month for Uzbekistan’s capital markets. The January 2023 fund NAV rose to an estimated USD 1,762.8 (+1.5%) or +76.3% since inception on 29th March 2019.

AFC Uzbekistan Fund valuations as of 31st January 2023:

 Estimated weighted harmonic average trailing P/E (only companies with profit):

 Estimated weighted harmonic average P/B: 1.01x
 Estimated weighted portfolio dividend yield: 3.97%


Capital markets update

On 17th January 2023, Clearstream paid a visit to Uzbekistan, meeting with the Central Bank, Ministry of Finance, and Tashkent Stock Exchange to advance discussions on establishing a custody link which will enable overseas investors to gain access to Uzbekistan’s capital markets without undergoing the bureaucratic process of opening a domestic brokerage account. This was of course just another round of talks, but nonetheless a positive, as establishing a link with Clearstream is one of George Paresishvili’s main objectives as CEO of the Tashkent Stock Exchange (TSE). The biggest hurdle at present for this project to advance is for a large foreign bank to enter the Uzbek market, which would enable Clearstream to offset currency risk in the Uzbek som. As mid-sized foreign banks from Georgia and Kazakhstan have entered the Uzbek market in recent years, it is only a matter of time and development of the local financial sector until a larger player enters the market, which would enable Clearstream to be more comfortable operating here. This is a matter which we will be keeping a close eye on, for easier access for foreign investors to the local market will likely have a significant positive effect on both liquidity and asset prices.

During the month, the Elsis Savdo OTC platform was brought under the management of the TSE. Previously a separate entity, per a presidential decree in early 2022, this merge was supposed to happen last year but was delayed. During the month, trading on the OTC platform was halted pending approval from the Ministry of Finance for the TSE to take over management, and trading resumed on 31st January 2023 with the exchange operating as usual. As regulation of the exchange is brought in line with the TSE, we foresee this bringing about further liquidity in the OTC market, where several of the AFC Uzbekistan Funds positions are traded.

Cold snap strangles Central Asian countries

Every December and January, Central Asia experiences a moderate cold snap. In Uzbekistan in recent years, this has led to short-term energy shortages, which affects people living in the rural areas more as gas and electricity supplies are curtailed. The shortages also impact domestic industry with gas supplies being cut which has led to producers of textiles and cement being forced to either curtail or shut down operations for a few weeks until temperatures improve.

This year however, Uzbekistan (and greater Central Asia) was hit with the coldest temperatures in 50 years as an arctic blast, which is currently impacting Europe and North America, severely impaired the country and its citizens. While Uzbekistan has sufficient natural gas, a near doubling of domestic demand in recent years and very healthy subsidies have done little to encourage more frugal usage of the country’s energy resources. One would have thought there would have been a wake-up call to the underinvestment and lack of preparation in the energy sector in previous winters, but it appears the government has only now finally realised the challenges it is up against to prevent energy shortages in the future.

As temperatures plunged to a low of -27 Celsius in Tashkent, Uzbekistan had planned to bridge its January energy deficit with gas supply from Turkmenistan. However, on 12th January 2023, wellheads in Turkmenistan’s gas fields froze, forcing them to shut-in production. This meant the country couldn’t export gas to neighbouring Uzbekistan, which sent Uzbekistan into a short-term crisis as the population experienced a lack of water, heat, and electricity, in some regions for up to a week. This led to embarrassing scenes of some residents in Tashkent resorting to cooking over wood in the streets.

Due to the crisis and anger among citizens as a result of the country’s lack of preparation for winter, on 16th January 2023, the Mayor of Tashkent and the head of Thermal Power Plants JSC were both fired. Surely these firings were partially symbolic as a way to show the government “hears the people”, but also certainly is due to incompetence, especially from the Tashkent Mayor, who is an influential businessman owning some of the largest manufacturing businesses in the country but who is equally very unpopular for his lack of transparent governance and development of Tashkent.


Frozen Tashkent

(Source: AFC Research)


At present, Uzbekistan’s mini energy crisis is over, and we can only hope the government has woken up to the lack of investment in its oil and gas fields which it needs to re-focus on to prevent this from happening in future winters, especially as the country continues to industrialise and copes with a growing population, which last year reached 36 million, and is becoming increasingly wealthy, thereby consuming greater quantities of energy.



AFC Uzbekistan Fund Marketing Information as of the end of December 2022